.
remove the
restriction on the Minister with respect to the number of Deputy Directors
of Professional Service Review he/she may appoint;

.
provide
a Professional Services Review Committee (a Committee) with power to require
persons, including those under review, to provide the Committee with such
documents as they specify prior to a hearing;

.
make it an
offence to obstruct or hinder a Committee or Committee member in the
performance of the Committee's functions, or to disrupt a Committee
hearing;

.
require a person under review to repay any
medicare benefit paid for inappropriate services rendered by specified
categories of persons, namely, themselves, one of their employees, or an
employee of a corporation of which they are an officer; and

.
increase the maximum disqualification period which may be imposed for a
practitioner who engaged in an inappropriate practice.

Background

The Health Insurance Amendment Bill (No. 1)
1997 deals with the issues of fraud and overservicing (or inappropriate
practice) under Medicare and the Pharmaceutical Benefits Scheme. The Bill
seeks to amend provisions of the
Health Insurance Act 1973 which
relate to the operation of the Professional Services Review Scheme. This
scheme was established in 1995 to combat inappropriate practice in two key
health programs: Medicare and the Pharmaceutical Benefits Scheme (PBS), both
of which are administered by the Health Insurance Commission (HIC). The
amendments proposed by this Bill are intended to overcome several aspects of
the operation of the Professional Services Review Scheme which are regarded
as cumbersome and which have been under challenge from individual
practitioners. The Australian Medical Association (AMA) is supportive of the
amendments.

1

The Professional
Services Review Scheme is an independent form of peer review which
determines "whether the conduct of a practitioner in rendering or initiating
services under Medicare or the Pharmaceutical Benefits Scheme constitutes
inappropriate practice".

2 In his second reading
speech on the Bill, the Minister stated that the Professional Services
Review Scheme "is this Government's primary means of investigating
allegations of inappropriate practice and taking action when those
allegations are proven".

The extent of medical fraud and
inappropriate practice has long been contentious and gauging an accurate
picture of the incidence and costs of each has proved elusive. A variety of
estimates have emerged from inquires into medical fraud and overservicing
which have been conducted during the 1980s and 1990s by bodies such as the
Joint Committee of Public Accounts (JCPA) and the Australian National Audit
Office (ANAO).

A report was recently released of a performance
audit conducted by the ANAO on the efforts of the Health Insurance
Commission in detecting and combating medical fraud and overservicing
(
Medifraud and Inappropriate Practice: Health Insurance Commission,
Audit Report No. 31, 1996-97). In its report, the ANAO found that an
accurate calculation of the incidence and costs of medical fraud and
inappropriate practice was not possible given the available data, but
estimated that medical fraud could be costing the Commonwealth between 0.7
and 1.6 per cent of Medicare and Pharmaceutical Benefits Scheme payments, or
between $52 million and $135 million per year. It estimated that
inappropriate practice could be costing a further $60 million (one per cent
of payments) per year.

The ANAO estimates that in total, some
$110 million to $190 million per year, or between 1.3 to 2.3 per cent of
payments under the Medicare and Pharmaceutical Benefits schemes, could
represent the level of medical fraud and inappropriate practice. The ANAO
argues that these estimates should be regarded as interim until the Health
Insurance Commission (HIC) is able to provide firmer estimates. The HIC has
indicated that it will re-examine the possibility of publishing an estimate
of the extent of medical fraud and inappropriate practice in
1997.

3 Given the interim nature of these
estimates of medical fraud and inappropriate practice, it is emphasised that
the figures should be treated with caution and regarded as indicative at
best.

In 1995-96, 464 medical practitioners and eight
optometrists were counselled due to concerns about their practices and 19
medical practitioners were referred to the Director, Medical Services
Review. The available information indicates that in 1995-96, the Health
Insurance Commission referred 13 providers to the DPP for prosecution and 4
successful prosecutions were achieved.

In 1995-96, some $1.1 million
in Medicare and Pharmaceutical Benefits payments which had been paid
incorrectly was recovered from providers and the
public

4 .

Main Provisions

.
Number of Deputy Directors of Professional Services
Review

The effect of the amendment proposed by
item 4 of
Schedule 1 of the Bill is to remove the restriction imposed on the
Minister under subsection 85(2) of the
Health Insurance Act 1973 (the
Principal Act)
with respect to the number of Deputy Directors of
Professional Services Review he/she may appoint. Subsection 85(2) currently
restricts the number of Deputy Directors which may be appointed to a maximum
of 15.

Remarks: The rationale given by the Government
in the Explanatory Memorandum for removing the 15 Deputy Directors limit is
that the current limit unnecessarily restricts the creation of review
Committees and places a burden on a few dedicated practitioners. It could be
argued that the proposed amendment is also a response to the estimated high
level of fraud and overservicing and the need to deter such inappropriate
practices. The Australian National Audit Office estimates that around 1.3 to
2.3 per cent of payments from Medicare and Pharmaceutical Benefits Schemes
($110 million to $190 million) per annum is lost through fraud and
inappropriate practices.

5

Content
and form of HIC referrals to Director of Professional Services
Review

Provision is made under
section 86 of the Principal Act for a referral for investigation of
inappropriate practice to the Director of the Professional Services Review
by the Health Insurance Commission (HIC). Section 87 deals with what a
section 86 referral must specify. Specifically, a referral must specify
whether it relates to:

(a) specified services; and/or

(b) services rendered or initiated by a practitioner that are of a
specified class, to a specified class of person, or provided within a
specified location.

To (b), above, is added by
item 5 of
Schedule 1 services provided within a specified period.

Remarks: The rationale given by the Government in the Explanatory
Memorandum for the proposed amendment is that the Professional Services
Review Scheme is based on considering conduct and it is necessary for the
scheme to be effective that a persons conduct to be able to be assessed in
relation to a period of time.

(b)
Offence for failure to produce
documents prior to a Committee hearing

A new section 105A is
inserted in the Principal Act by
item 9 of Schedule 1 which provides
a Professional Services Review Committee (a Committee) with power to require
persons, including those under review, to give them such documents as they
specify prior to a hearing. Notice of a requirement to produce documents
must be given at least seven days before the day on which the documents are
required to be produced (proposed subsection 105A(2)).

The
documents must be produced to a Committee member, or persons nominated by a
Committee member, at the time and place specified in the notice informing
the person of the requirement to produce the documents. Failure to produce
documents constitutes an offence punishable by a maximum penalty of 20
penalty units ($2 000) (proposed subsection 105A(3)).

The power
accorded by proposed section 105A is mitigated by proposed subsection
105A(7) which provides that the relevant document/s and any information or
thing obtained is not admissible in evidence in criminal proceedings or
proceedings for recovery of a pecuniary penalty against the person producing
the document. Proposed section 105A(8) provides an exception to proposed
subsection 105A(7), that is, where a person knowingly produces a document
that contains a false or misleading statement. In such a case the
information obtained can be used in criminal proceedings or proceedings for
recovery of a pecuniary penalty against the person producing the document.

Documents produced prior to a hearing may be inspected by a
Committee member; retained by a Committee member for a reasonable period;
and a Committee member may make copies of, or take extracts from, the
document (proposed subsection 105A(4)).

It is an offence,
punishable by a maximum penalty of 20 penalty units ($2 000) for a person to
knowingly produce a document that contains a false or misleading statement
without identifying the respects in which they know it be false or
misleading (proposed subsection 105A(5)).

Self incrimination
will not be an excuse for the non-production of document except for a person
under review (proposed subsection 105A(6)).

Remarks:
A number of rationale are provided by the Government in the Explanatory
Memorandum for proposed section 105A, including: to ensure a Committee can
properly consider the documents before a hearing or setting a hearing date;
and several of the Committees have been concerned that medical records may
have been altered following the issuing of a notice.

(b)
Offence of
contempt of Committee

Item 10 of Schedule 1 inserts a
new section 106EA in the Principal Act making it an offence to obstruct or
hinder a Committee or Committee member in the performance of the Committee's
functions, or to disrupt a Committee hearing. The penalty for such an
offence is 20 penalty units ($2 000).

Remarks: The
rationale given by the Government in the Explanatory Memorandum for proposed
section 106EA is that experience has shown that existing provisions are
likely to be inadequate in dealing with disruptions and threats against
Committee members.

(b)
Content of determinations for engaging
in inappropriate practice

Existing section 106U of the
Principal Act specifies the actions the Director of Professional Services
Review, or their nominee, can take against a person engaging in an
inappropriate practice. These include:

that the person under
review repay the Commonwealth an amount equivalent to any medicare benefit
paid for inappropriate services (whether or not the medicare benefit was
paid to the person), and that any medicare benefit that would otherwise be
payable for those services cease to be payable (subparagraph
106U(1)(c));

A new paragraph 106U(1)(c) is substituted in the
Principal Act by
item 17 of Schedule 1. It provides that the person
under review repay to the Commonwealth the whole or a part of the medicare
benefit paid (whether or not it was paid to them) for services that:

(

.

)were rendered by the person under review,
an employee of the person under review, or an employee of a corporation of
which the person under review is an officer; and

(.)are
services in connection with which the person is stated in a report to the
Determining Officer to have engaged in inappropriate practice;

and that any medicare benefit that would otherwise be payable for the
services cease to be payable.

Remarks: The major
difference between proposed paragraph 106U(1)(c) and the current paragraph
106U(1)(c) is in their scope. Whereas the current paragraph 106U(1)(c)
requires a person under review to repay any medicare benefit paid for the
inappropriate services, proposed paragraph requires a person under review to
repay any medicare benefit paid for inappropriate services rendered by
specified categories of persons, namely, themselves, one of their employees,
or an employee of a corporation of which they are an officer.

In essence, the rationale provided by the Government in the Explanatory
Memorandum to the Bill for extending the scope of paragraph 106U(1)(c) is
that 'No one can condone abuse of Medicare and cases with a proven high
degree of culpability involving hundreds of thousands of dollars warrant
strong action at the top end of the measures provided in section
106U'

6

.

Period of
disqualification for engaging in an inappropriate practice

Subsection 106U(3) of the Principal Act provides in relation to a
practitioner who has engaged in an inappropriate practice for their
disqualification for a maximum of 12 months in respect of:

Item 20 of Schedule 1 increases the maximum disqualification period that
must be imposed from 12 months to 3 years.

Subsection 106U(4)
of the Principal Act provides in relation to a practitioner who has engaged
in an inappropriate practice for their disqualification for a maximum of 3
months.
Item 21 of Schedule 1 increases the maximum disqualification
period from 3 months to 3 years.

.
Referrals by the
Determining Officer

A new section 106XA is inserted in the
Principal Act by
item 24 of Schedule 1 which provides the Determining
Officer (the Determining Officer makes determinations dealing with
inappropriate practice found by a Committee) with the power to refer
material before him/her to a body specified in the regulation, where of the
opinion it may be required against a person under review for an
inappropriate practice. Referred material must not disclose the identity of
a particular person unless the Determining Officer believes the body needs
to know the identity of that person in order to properly carry out its
functions. Where identity is disclosed, the identified person must be
notified of the disclosure.

Endnotes

1
Anastasopoulos, C., "Tougher law on doctor conduct",
Australian
Dr, 18 April 1997.